Housing Starts in U.S. Increased to 549,000 in March, Exceeding Forecasts

By Bob Willis -
Apr 19, 2011

A gain in March housing starts
failed to make up for ground lost the prior month, as U.S. home
builders continue to struggle almost two years into the economic
recovery.

Work began on 549,000 houses at an annual pace, up 7.2
percent from the prior month and exceeding the 520,000 median
forecast of economists surveyed by Bloomberg News, figures from
the Commerce Department showed today in Washington. Starts fell
19 percent in February to the lowest level in almost two years.

Housing, which pushed the economy into the recession,
remains the weak link in the recovery and continues to weigh on
consumer spending as home prices fall. The prospect of more
foreclosures and joblessness forecast to average 8.7 percent
this year means any recovery in housing may take time to
develop.

“We remain at very low levels,” said Richard DeKaser, an
economist at Parthenon Group in Boston, who correctly forecast
last month’s increase. “The best description is bumping along
the bottom. The underlying trend is one of stability or modest
improvement since we hit our low point a couple of years ago.”

Stocks rose as earnings at companies from Johnson & Johnson
to Steel Dynamics Inc. beat estimates. The Standard & Poor’s 500
Index climbed 0.6 percent to 1,312.6 at the 4 p.m. close in New
York.

Housing starts estimates ranged from 475,000 to 620,000 in
the Bloomberg News survey of 77 economists.

February Revision

The Commerce Department revised February’s total to a
512,000 pace, up from a previously estimated 479,000. It was
still the lowest since a 477,000 pace in April 2009 that was the
weakest on record.

The revisions plus an increase in construction applications
made the figures look less dire. Building permits, a proxy for
future construction, rose 11 percent to a 594,000 pace. They
were projected to rise 1.1 percent to a 540,000 annual pace.

Construction of single-family houses increased 7.7 percent
to a 422,000 rate in March from the prior month. Work on
multifamily homes, such as townhouses and apartments, increased
5.8 percent to an annual rate of 127,000.

Starts climbed in three of four regions, led by a 32
percent jump in the Midwest. They fell 3.3 percent in the South.

Confidence among U.S. homebuilders fell in April, led by a
decline in the outlook for sales. The National Association of
Home Builders/Wells Fargo sentiment index declined to 16 this
month from 17 in March, data from the Washington-based group
showed yesterday. A measure of sales expectations for the next
six months dropped to the lowest level since October.

Home Sales

New-home sales fell to a record-low annual rate of 250,000
in February, the Commerce Department reported on March 23. The
median price dropped to the lowest level since December 2003.

Sales of existing homes, which make up more than 90 percent
of the market, rose 2.5 percent to a 5 million annual pace in
March, economists surveyed by Bloomberg forecast the National
Association of Realtors may report tomorrow. Existing home sales
have been gaining market share from new homes due to increased
cash purchases of distressed homes.

Lending rates are rising as the broader economy recovers.
The average rate on a 30-year fixed loan increased to 4.98
percent the week ended April 8, the highest since Feb. 18,
according to the Mortgage Bankers Association. Borrowing costs
have climbed since reaching 4.21 percent in October, the lowest
since the group’s records began in 1990.

More Foreclosures

Even with home seizures currently delayed as banks and
state attorneys general struggle to agree on new guidelines,
foreclosure filings will climb about 20 percent in 2011,
reaching a peak for the housing crisis, RealtyTrac Inc. said
Jan. 13.

CoreLogic Inc. last month estimated about 1.8 million homes
were delinquent or in foreclosure, a so-called “shadow
inventory” set to add to the 3.5 million existing homes already
on the market.

“Activity in the housing market continued to be depressed,
held down by the large inventory of foreclosed or distressed
properties on the market and by weak demand,” Federal Reserve
policy makers said in minutes of their March 15 policy meeting
released April 5.

Homebuilders aren’t optimistic. KB Home (KBH), the Los Angeles-
based homebuilder that targets first-time buyers, this month
reported a bigger-than-expected loss for the quarter ended Feb.
28 as orders plunged.

“Today’s consumers remain very cautious, whether they have
concerns about home prices falling further, their job status,
their ability to qualify for a loan, or general confidence in
the economy,” President and Chief Executive Officer Jeffrey Mezger said during a conference call with analysts on April 5.
“A sustained, broad-based housing recovery will not occur until
we start to experience material job creation.”